Buying a business can be a daunting task in itself. For first-time buyers, it’s an even greater conquest than one may think. While the degree of difficulty varies depending on several factors, you should prepare yourself as a first-time entrepreneur for the ups and downs along the way. Ultimately, it’s about managing your expectations and being prepared for the challenges that will come your way.
Here are some tips for first-time business buyers:
Looking at the Financials Won’t Be Enough
It’s tempting to purchase a business for the sole reason that it’s lucrative. After all, that’s the point of buying a business. If the track record and financial reports seem flawless, it’s obviously a huge factor to consider in decision-making. However, it’s important not to be lured by profitability alone.
Buying a business is both emotional as it is financial. Before you flip the pages and read through the numbers of its cash flow history, you have to make sure that the business is right for you. Make no mistake: not every business opportunity will fit like a glove. While there are compromises to be made, the first thing you should examine is whether you can handle the nature of the industry as a whole.
Ask yourself: am I qualified enough to run this type of business? Honesty and self-awareness are paramount in this preliminary examination. Although you may have the budget to buy a commercially attractive business, you’re immediately setting yourself up for failure if it’s something that’s out of your league. Consider your skills, expertise, and experiences in making this decision. Are you familiar enough with the nature of the business? Are you passionate enough to commit for the long haul? Is it important enough to make you invest an insurmountable amount of time and energy?
It Won’t Be an Overnight Success
Buying a business, let alone running, won’t be a walk in the park. It’s important to establish this right from the start to manage your expectations. More often than not, it’s not you – that’s just how businesses work.
Small businesses usually take around 2 to 3 years to make a profit – that’s the critical period of survival. If you’ve managed to survive the 3-year mark, you’ll be faced with the challenges of finding ways to grow. By year 4, you’ll have to invest in sharper marketing strategies, effective brand positioning, better product development, and more refined customer acquisition. This is the phase where you take enough risks that won’t completely cost you by a large margin but will allow you to reposition your business for growth and development.
To truly become successful, the goal is to hit the 7 to 10-year mark. But don’t fast-track it. Take it one step at a time. Navigate your business’s roadmap slowly but surely.
Consider a Franchise Option
Buying a franchise is ideal for first-time entrepreneurs. For one, you’re not going in blind. You’re purchasing a brand that has been tested in the market, has a track record of smooth cash flow, a solid customer base, and an existing network of suppliers. All you have to do is invest in these established value drivers and guide the business in the right direction. Unlike independent businesses, franchises have comparatively lower risks as a readily-available business model and blueprint will be handed to you.
It’s also wise to create a solid relationship with your franchisor. More often than not, franchisors help business buyers by showing them the ropes of the business, orienting them with the know-how, and giving them the general support to ensure a smooth transition.
Before buying a business, first-time entrepreneurs should assess two things: the business, and more importantly, themselves. It’s not enough to settle on whether or not a certain venture will give you instant cash flow. Ultimately, the goal is longevity. To succeed in the long run, you have to have the right reasons, the right nature of business, and the right attitude to back up your decision.
